MGM MIRAGE was last night on the verge of creating the world’s biggest casino company as it reached a tentative agreement to buy Mandalay Resorts, one of its largest Las Vegas rivals, for $4.8 billion (£2.6 billion).
MGM was locked in tense negotiations all weekend with Mandalay after its initial offer of $68 a share was rejected on Friday night.
But as the sun rose above the scorched tarmac of Las Vegas Boulevard yesterday morning, the pair announced a preliminary agreement to seal the deal at $71 a share.
The offer, which includes $600 million in convertible debentures and the assumption by MGM of some $2.5 billion of Mandalay debt, will be put to the boards of both companies at a meeting today.
Last night, however, lawyers on both sides were hurriedly drawing up new documentation for the deal, which should be complete within 12 months, assuming board approval and its acceptance by Mandalay’s shareholders.
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Mandalay played a perfect game of poker, holding out all day and night on Friday for a higher price and better terms.
In the end it was Kirk Kerkorian, the 87-year-old majority shareholder of MGM Mirage, who folded.
Mandalay was most worried about regulatory approval, because the combined company will be by far the biggest hotelier on the Las Vegas “Strip”, with some 72,000 rooms.
MGM, therefore, agreed to shoulder all responsibility for getting the deal past the regulators and agreed to drop a request for an option to scrap the deal after 15 months if regulators asked them to sell properties because of competition concerns.
A source close to the company said competition regulations should not pose a great obstacle as there is no shortage of alternative gambling operations in Las Vegas and that the proposed entity would control only some 10 per cent of the local market.